The Federal Trade Commission has hit the home buying company and seller Opendoor with a $62 million dollar fine for cheating home sellers.
The FTC said in its complaint that Opendoor misled and lied to sellers by telling them they would make more money by selling their homes to them vs selling through more traditional means and local home buying companies.
The company disputes the allegations, though it says it has stopped using deceptive and misleading marketing tactics.
Eric Wu founded Open Door in 2014 and went public in 2020 after raising $1.5 billion from investors. In a 2020 SEC filing, the company disclosed that the FTC was investigating its marketing practices.
Opendoor issued a statement noting that the company’s leaders “strongly disagree” with the allegations but are settling with the commission anyway and that the company has already modified its marketing messages.
The proposed order FTC includes the $62 million fine, which the agency expects to use to pay back Opendoor customers who the company scammed and stole from. The FTC also ordered the company to cease its deceptive practices against potential home sellers and to stop making false and baseless claims.
When Opendoor was born it promised to revolutionize the real estate market but in reality it built its business using old fashioned lies and deception about how much consumers could make by selling their homes on their platform. There is nothing innovative about cheating and scamming consumers.
The FTC also challenged the company’s claim that it purchased homes at market prices and said that the company’s offers are, on average, below market value.
The FTC in its complaint detailed why Opendoor’s marketing materials were deceptive and misleading in a 14-page report that included screenshots of Facebook ads and website charts of costs shown to its customers. The FTC said this evidence seemed to promise consumers they would make more money by selling to Opendoor because all fees were bundled together into one amount. In reality however, they often paid much more than they would have selling their homes via a real estate agent or even selling to a local, reputable home buying company.
Opendoor bought 36,908 homes in 2021 and refers to itself as an instant buyer, or iBuyer, which buys homes directly from sellers at below market prices and then resells them at the true market price at a profit. On top of this profit Opendoor charges its customer hefty fees and junk fees. The company is able to close on homes faster than some traditional buyers purchasing via a real estate agent. Earned honestly or not, Opendoor, reported $28 million in net income in the first quarter (3 months) of 2022.
Announced earlier today “Zillow and Opendoor announce multi-year partnership”, Are these companies so naïve to think for a moment that the American consumer will allow Zillow, if utilizing the same Opendoor marketing and business model, to steal from them? I can assure you that they aren’t going to fall for this Zillow/Opendoor smoke and mirrors thing.